Bankruptcies afflict Japan's real-estate sector

Aug 28, 2008, 9:24 GMT

Tokyo - Japan's financial sector has been plagued by a series of bankruptcies of real-estate firms, giving rise to worries about Japan's economic outlook and having an impact Thursday on the stock exchange.

While the world's second-largest economy has been spared the worst effects of the US mortgage and credit crisis, rising debt among its real-estate firms has caused worry among Japan's banks and investors.

The latest failures came this week with home builder Sohken Homes Co and property developer Sebon Corp.

Sohken Homes declared bankruptcy under 33.89 billion yen (310 million dollars) of debt, saying failures among other firms in the industry had led to difficulty in refinancing its debt. Its shares are to be delisted on September 27.

The bankruptcy declarations continued to impact investors' moods Thursday on the Tokyo Stock Exchange, where the broad Topix index of all first-section issues fell 0.34 per cent to 1,219.53 while the benchmark Nikkei 225 Stock Average saw a slight gain of 0.12 per cent, closing at 12,768.25, as investors picked up some bargains after two previous days of declines.

The largest bankruptcy in the sector this year has been Urban Corp, which filed for court protection from its creditors this month with 255.83 billion yen in debts.

Tokyo Shoko Research said the wave of bankruptcies was the highest in five years.

The problems in Japan's real-estate sector stem from the downturn in the economy and rising raw-materials prices, but also playing a role are more stringent construction regulations the government imposed last year after the construction of residential buildings that did not meet earthquake codes.

Experts said the difficulties among developers is causing the greatest worries among small and mid-sized regional banks, which provide credit to real-estate firms.